Delhi High Court Restrains AAI From Encashing ₹3.17 Cr Bank Guarantees In Jabalpur Airport Upgradation Dispute

The Delhi High Court has recently restrained the Airport Authority of India from taking any further precipitative or coercive action against NKG Infrastructure Ltd. in relation to bank guarantees aggregating to Rs. 3.17 crore furnished for the Jabalpur Airport upgradation project, noting that the disputes are already under consideration before a Dispute Resolution Committee (DRC).

It clarified that the present order will not apply to two bank guarantees that have already been processed for encashment.

The court further directed that no coercive action shall be taken against the contractor for a period of ten days after the decision by the DRC.

A Single Bench of Justice Mini Pushkarna held:

“Accordingly, since hearing is already being granted and the matter is being taken up by the DRC in terms of Clause 25 of the Agreement between the parties, it is directed that no further precipitative action shall be taken by the respondent against the petitioner, till the proceedings before the DRC are finally adjudicated.”

“The respondent shall also not take coercive action against the petitioner for a further period of 10 days after the decision by the DRC in the proceedings, as aforesaid”, it added.

The dispute arises from an agreement dated June 4, 2019 between NKG Infrastructure Ltd. and the Airport Authority of India for the upgradation of Jabalpur Airport, with disagreements emerging over delays, imposition of penalty, and amounts claimed under the final bill.

While NKG Infrastructure maintained that the delay was not attributable to it and that extension of time had been granted, the Authority contended that the final bill had been prepared and that the contractor had failed to come forward to sign it despite reminders, leading to invocation of bank guarantees.

NKG Infrastructure invoked the dispute resolution mechanism under Clause 25 of the agreement on January 19, 2026, seeking adjudication of its claims before the Dispute Resolution Committee, with arbitration to follow if required.

Around three months later, the company moved the Delhi High Court for interim protection, challenging letters dated April 24, 2026 issued by the Airport Authority of India to various banks for encashing guarantees worth Rs. 3.17 crore.

Before the court, the contractor argued that invoking the guarantees at this stage was arbitrary, illegal, and unsustainable, especially when the disputes were already pending consideration before the DRC.

The Airport Authority, however, pushed back, saying the guarantees were unconditional and operated as independent contracts with the banks, allowing invocation without court interference. It also pointed out that six guarantees had been invoked in all four had already been encashed, while two were already in the pipeline for encashment.

The court took note of the fact that once Clause 25 had been triggered, a Dispute Resolution Committee had in fact been set up, and had even held a hearing as recently as April 23, 2026.

Against this backdrop, the court said no further precipitative action should be taken against the contractor until the DRC completes its adjudication. At the same time, it made clear that its order would not come in the way of the two guarantees that had already been processed for encashment.

For Petitioner (NKG Infrastructure Ltd.): Advocates Ankit Gupta, Manaswee, Shaurya A. Singh.

For Respondent (Airport Authority of India): Advocates Digvijay Rai, Archit Mishra.